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On Friday, Smithfield Foods will release its latest quarterly results. The once-quiet corner of the food-production market got a big jolt when Smithfield got a buyout offer from a Chinese company, but even with the offer outstanding, it's important to check on the health of Smithfield's underlying business.

Smithfield is the largest pork producer in the world, but it hasn't seen a huge amount of growth lately. With high crop prices putting pressure on feed costs, the company has faced challenges in keeping its profits up, but efforts to bolster its international presence have clearly attracted the attention of its foreign peers. Let's take an early look at what's been happening with Smithfield Foods over the past quarter and what we're likely to see in its quarterly report.

Stats on Smithfield Foods

Analyst EPS Estimate

$0.43

Change From Year-Ago EPS

0%

Revenue Estimate

$3.27 billion

Change From Year-Ago Revenue

1.9%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Smithfield Foods fatten up its earnings?Analysts have had mixed views on Smithfield's earnings in the past few months. They've cut their estimates for the April quarter by $0.04 per share, but they've boosted their outlook for the next fiscal year by the same amount. The stock, of course, has soared following the takeover bid, rising more than 25% since early March.

Obviously, the big news for Smithfield during the quarter came from Shuanghui International's offer to buy out the company for $34 per share. The $4.7 billion offer has raised some nationalistic concerns, as the Committee on Foreign Investment in the U.S. will have to approve the merger, but Smithfield CEO Larry Pope said last month when the deal was announced that it believes the deal won't have an effect on the company's operations. In fact, the combination of China's largest meat processor and the world's biggest pork producer could produce a formidable opponent to industry rivals. In particular, Chinese pork producer Zhongpin will inevitably find itself under pressure if the deal goes through, as Shuanghui puts itself in a stronger competitive position in the industry.

One reason why Shuanghui might have noticed Smithfield came from the pork producer's March quarterly report, when the company topped estimates due largely to the strength of its packaged-meat business. That report had some major shareholders calling for Smithfield to break up its business into multiple parts, separating its more lucrative packaged-meat business from hog production and its international operations. Hormel , which focuses primarily on the packaged side of the business, boasted a higher earnings multiple than Smithfield, spurring calls for Smithfield to unlock potential value.

The problem that Smithfield had faced primarily came from its farm operations, which have suffered from a lack of profitability. By contrast, Tyson Foods has seen rising volumes from its pork-processing division and got its best profit margins from that area, despite seeing falling prices. But Smithfield thinks even that portion of the business will start making money again by next year.

In Smithfield's report, don't forget to look at the fundamentals of the company's business. Odds are good that the merger will go through as planned, but to be on the safe side, you'll want to make sure that the company's growth strategy is still on track.

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